CENTRO Retail Australia has moved back into contention as an investment-grade real estate investment trust with its inclusion in the top 100 index and a more balanced share register.
After struggling to keep afloat over the past four years, the retail REIT now has less than 40 per cent of its register tied up with short-term, volatile hedge funds and a sector-standard gearing rate of about
26 per cent.
Its next hurdle is to improve its credit rating through the restructure of debt from further asset sales and cost controls.
The more stable register also makes the group less of a takeover target as investors are now long-term institutional and superannuation funds.
Jason Weate, an analyst at Deutsche Bank, said with the gearing guidance of about 26 per cent, Centro was well placed to access debt capital markets by around the end of calendar 2012 and/or restructure its core lending facility of about $1.3 billion.
Armed with $690.4 million in cash from the sale of a half share in three key assets to the Perth-base Perron Group, Centro can now also repay its $200 million liability from the long-running shareholder class action.
Under that deal Centro sold a 50 per cent interest in the shopping centres Galleria in Perth, The Glen shopping centre and its head office in Melbourne, and Colonnades in Adelaide.
Once debt is repaid and the asset sales completed, Centro's management intends to look at expansion through acquisitions and new developments, particularly in Western Australia.
In an investor update released yesterday, the group's chief executive, Steven Sewell, said Centro was to be included in the MSCI this week , which followed its re-entry to the S&P/ASX 100 Index, S&P/ASX 200 Index and S&P/ASX 200 REIT Index in March this year.
He confirmed Centro was on target to distribute 6.4? per security for the year to June 30.
Mr Sewell said Centro was continuing to gain more long-term REIT investors.